Angel Investor Heaven in Social Media - Never a Better Time to "Invest and Test"

Great Time for Start-ups

There may have never been a better time than right now to be a start-up in the Silicon Valley, Austin or Boston which is where many of these new social technologies are emerging. Look at the dramatic decrease in the cost of processing power, storage and web-based computing. This dramatic turn in the favor of development capabilities against capital benefits the many start-ups who want a piece of the growing social media pie. Not only do new development frameworks allow for faster delivery of and re-use of code, the sophistication of users makes it easy to test variations of an idea almost daily.

Who Needs Marketing?

Marketing is driven by word of mouth for these young companies. Once the developers start talking about what they’re doing, their friends tell their friends and so on. Either these core users like it or they don’t. Believe me when I tell you that if anyone is going to give an honest opinion, it should be a software developer. If their friends don’t like the software, the founders make adjustments and keep coding. There is no need to throw a huge budget at early marketing because most core ideas can be tested and validated for very little. Add to that the ability to reach out to existing social networks, and a market research sample can be gathered to help shape direction.

Not Capital Intensive

The conventional wisdom that an entrepreneur has to get $5 million of capital and start a software company is simply no longer true. In fact, it’s bordering on reckless in the early investment world and can create a lack of intense early focus. For sometimes much less than $1 million, new ideas can put out there and tested for further investment which lowers the risk for all future investors and increases the reward for the entrepreneur and angel investors. The result we are seeing today is a continuous crop of new social media business models being put forth that will challenge the current group of centralized social media players’ value. This is nothing short of efficient organic growth and virtually guarantees the development of improved social media.

Start-ups can still Fail

If an entrepreneur needs capital, they should target experienced operators and angel investors for early money. They should find an investor who has seen the last twenty years go by in the high tech world and can see forward another twenty. There is value from past lessons and a sincere openness to what comes next. An investor who appreciates markets, business models and removing barriers for the entrepreneur is essential. They need to bring more than money to the table. The entrepreneur will need access to great technical people and relationships that can fast forward milestones that will lead to real traction. If the start-up's idea is not able to attract an investor with this background, chances are the idea is not ready for serious consideration without more credible evidence. A good angel investor should be listened to like a shaman. They see hundreds of ideas and their job is to thin out the herd to achieve high probability of success for all parties. This is not a time to be P.T. Barnum. It is a time to show passion combined with the ability to listen. The journey is just beginning and the angel investor will want to know that the entrepreneur is going to be a great partner.